Co-op is to sell all 129 of its petrol forecourt sites across the UK to Asda, including three in the north and north-east for an enterprise value of £600m, using part of the proceeds to help cash-strapped customers.
The convenience store giant will use some of the £600m to offset pricing in a bid to help consumers being confronted with rapidly escalating grocery costs as inflation continues to rocket.
Forecourts being sold in the north and north-east are those in Kirkwall, Broadford on Skye and Stonehaven.
For the Skye business, only the fuel kiosk will be sold, with the Co-op shop being retained, while for the other stores, the current range and branding will continue until the sale completes in the coming months.
Subsequently the stores will be operated by Asda.
A Co-op spokesman told the Press and Journal: “We will look to use the money to invest in Co-op price and store operations. We are not immune from price pressures.”
Part of Co-op’s decision to divest its petrol division stems from a future trend which will see increasing numbers of forecourts having to cater for electric cars – a considerable investment given Co-op’s portfolio.
We have got to think about the future”
Co-op spokesman
“We have got to think about the future,” said the Co-op spokesman adding: “In the future we would have had to convert to electric forecourts – we made the decision these were non-core assets for us.
“It would no doubt be a lucrative market to go into but it would need significant capital expenditure and when you have got an estate like we have, to then spend significant capital in the future, that is disproportionate.
“The £600m takes our debt position down, it will enable us to invest heavily in our core business.”
Asda currently has 320 petrol stations across the UK and said the purchase is part of plans to move into the smaller convenience shop market.
Mohsin Issa, co-owner of Asda, said the supermarket saw convenience stores as a “significant growth opportunity for the business”.
The sale represents 5% of Co-op’s retail estate of 2,564 stores and as well as helping pricing in the current climate, will free up cash for the business’ growing wholesale, franchise and e-commerce operations, including new convenience stores in the heart of more communities.
Co-op chief executive Shirine Khoury-Haq added: “This transaction is in line with our strategy to move away from operating petrol forecourts and supports our vision of co-operating for a fairer world while building our core leading convenience business.
“We will work closely with Asda to ensure a smooth transition.”
The transaction is due to complete in Q4 2022.
The enterprise value of around £600m includes a cash consideration of £438m and is also inclusive of IFRS 16 lease liabilities of approximately £162m.
The final amount will be confirmed on completion.
Earlier this month Co-op said it would not allow north and north-east communities to become “cash deserts” and would provide free ATMs in every store where possible, and if not offer free cashback services or Post Office counter withdrawals.
Co-op employs almost 60,000 people
The convenience retailer also has interests in the food, funerals, insurance and legal services sectors.
It operates more than 2,500 food stores, more than 800 funeral homes and provides products to 5,000 other stores, including those run by independent co-operative societies and through its wholesale business, Nisa Retail.
The Co-op employs almost 60,000 people and has an annual turnover of more than £11 billion.
